In the chemical industry, one question repeatedly comes up:
“How can we improve margins when customers keep comparing us on price?”
The answer may not always be a better pricing strategy.
Sometimes, the real answer is to change what you are selling.
A commodity is typically compared on:
→ Price
→ Availability
→ Specification
→ Delivery
A specialty chemical, however, can be valued on:
→ Performance
→ Application expertise
→ Consistency
→ Technical support
→ Process efficiency
→ Regulatory compliance
→ Sustainability
→ Total cost of ownership
That difference creates pricing power.
So, how does a chemical company move from commodity to specialty?
1️⃣ Solve a customer problem—not just a specification
Customers don’t ultimately buy materials / molecules. They buy solutions to manufacturing, performance or cost problems or to comply with new/existing regulations
The closer a product is connected to a critical customer problem, the less relevant pure price comparison becomes.
2️⃣ Build application expertise
Product differentiation alone is often temporary. Every product goes through a life-cycle and at after a stage it becomes commodity. You can only extend the life-cycle curve and delay that ultimate stage.
However, Application knowledge is harder to replicate.
A company that understands the customer’s process, formulation, equipment and end-use application can create significantly more value than a company simply supplying the same chemical.
3️⃣ Move from product selling to value selling
Instead of saying: “Here is our product at ₹X/kg.”
The conversation should become:
“Here is how our solution can reduce your consumption, improve productivity, reduce rejection or extend product life etc.”
That changes the pricing conversation.
4️⃣ Invest in customer co-development
The strongest specialty businesses often develop products with customers rather than simply for customers.
Joint development creates technical stickiness, deeper relationships and higher switching costs.
5️⃣ Build differentiated intellectual property
Formulations, process know-how, application technology, technical service and proprietary grades can create differentiation even when the underlying chemistry is not unique.
6️⃣ Choose the right markets
Not every market deserves the same strategy.
The most attractive specialty opportunities often sit where customers value:
Performance × Reliability × Technical Support × Sustainability
more than simply ₹/kg.
The real transformation
The journey is not simply:
Commodity → Higher Price
It is:
Commodity → Differentiated Product → Application Solution → Customer Value → Pricing Power
And perhaps the most important lesson is this:
Pricing power is rarely created in the sales department. Make your Marketing Team Stronger. And Marketing Team does not mean only promotion.
Peter Drucker, the Father of Modern Business Management, famously stated that because the purpose of a business is to create a customer, it has only two basic functions: marketing and innovation. Everything else in an organization represents a cost.
Business = Marketing + Innovation (= R&D)
And this equation is valid for both B2C and B2B business. One needs to understand how and where to apply
For a layman for whom Marketing is just a promotion, It is best describes as the combination of:
R&D + Application Development + Marketing + Technical Service + Sales + Customer Understanding.
But It works in reverse direction
Customer Requirement — > Sales & Marketing —– > Application Development —- > R&D —– > Make a the right product
For chemical companies, the future may not belong to those who manufacture the cheapest product.
It may belong to those who create the highest measurable value around that product.
What do you think?
Can a chemical company create sustainable pricing power without becoming a true specialty-chemical player?
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